We investigate the impact of ‘Working Credit’, a nationally-implemented programme which created increased incentives for welfare recipients to undertake temporary work. Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks. Unconditional and regression-adjusted difference-in-difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients. Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.

Although the impact of non-parental care on children has been widely analysed, there is still little consensus in the literature. This is due in part to the issue of selection: if families who choose parental care are different from those who opt for non-parental care, the observed association between outcomes and care may not be causal. We address this using four strategies: controlling for a wide array of observable characteristics (including lagged outcomes), using propensity score matching, estimating unobservables bias by looking at selection on observables, and instrumenting use of care with supply-side or demand-side shocks. We find that non-parental care is associated with worse behavioural outcomes, but that the magnitude of the difference is quite small. Moreover, we cannot reject the hypothesis that our effects are solely due to selection. To the extent that we observe differential impacts, the association between non-parental care and behavioural outcomes appears to be more negative in high-SES families, and less negative in day care centres with smaller group sizes (though again, these relationships may not be causal).

Understanding the effect of informal care for an elderly or disabled person on labor market outcomes is important for developing policies targeted towards caregivers. However, because of omitted variables bias, simple cross-sectional relationships may provide a misleading picture of the causal impact of informal care provision on labor force status. To address this, I use panel data for the period 2001−2007, which make it possible to track the same individuals over time, and observe how their outcomes alter as their care arrangements change. While caregiving does appear to have a modest negative impact on labor force participation, this impact is only one-quarter to one-sixth as large in the panel as in the cross-section. Taking account of individual heterogeneity, the impact of caregiving on other labor force outcomes (and on life satisfaction) seems to be small or non-existent. Large estimated effects from cross-sectional regressions are most likely driven by individual heterogeneity. One possible interpretation of this result is that the impact of caregiving on labor market outcomes and life satisfaction takes several years to manifest itself. Another is that the causal effect of caregiving on labor force outcomes and life satisfaction is quite small.

We test for gender discrimination by sending fake CVs to apply for entry-level jobs. Female candidates are more likely to receive a callback, with the difference being largest in occupations that are more female-dominated.

Does Maternal Age Affect Children’s Test Scores? (with Xiaodong Gong), Australian Economic Review, 2010
We estimate the relationship between maternal age and child outcomes, using indices aimed at measuring overall outcomes, learning outcomes and social outcomes. In all cases,we find evidence that children of older mothers have better outcomes. Not only do children born to mothers in their twenties do better than children born to teen mothers, but children born to mothers in their thirties do better than children born to mothers in their twenties. However, when we control for other socioeconomic characteristics, such as family income, parental education and single parenthood, the coefficients on maternal age become small and statistically insignificant. The only exception is an index of social outcomes, which is positively associated with maternal age, even controlling for socioeconomic factors. For cognitive outcomes, young motherhood appears to be a marker, not a cause, of poor child outcomes.

We conduct a large-scale audit discrimination study to measure labor market discrimination across different minority groups in Australia – a country where one quarter of the population was born overseas. To denote ethnicity, we use distinctively Anglo-Saxon, Indigenous, Italian, Chinese, and Middle Eastern names, and our goal is a comparison across multiple ethnic groups rather than focusing on a single minority as in most other studies. In all cases, we applied for entry-level jobs and submitted a CV showing that the candidate had attended high school in Australia. We find economically and statistically significant differences in callback rates, suggesting that ethnic minority candidates would need to apply for more jobs in order to receive the same number of interviews. These differences vary systematically across groups, with Italians (a more established migrant group) suffering less discrimination than Chinese and Middle Easterners (who have typically arrived more recently). We also explore various explanations for our empirical findings.

We estimate the relationship between hourly wages and two aspects of body size: height and body mass index (BMI). We observe a height premium, with an additional 10 centimetres of height being associated with a 3 per cent increase in hourly wages for men. However, workers with higher BMI scores do not seem to earn lower wages. These results are largely unaffected by controlling for physical health, or (in the case of BMI) instrumenting with the BMI of biological family members. A survey of previous instrumental variables studies shows little indication of systematic biases, suggesting that OLS may provide a reasonable estimate of the causal impact of BMI on wages.

How are hourly wages affected by the Earned Income Tax Credit? Using variation in state EITC supplements, I find that a 10 percent increase in the generosity of the EITC is associated with a 5 percent fall in the wages of high school dropouts and a 2 percent fall in the wages of those with only a high school diploma, while having no effect on the wages of college graduates. Given the large increase in labor supply induced by the EITC, this is consistent with most reasonable estimates of the elasticity of labor demand. Although workers with children receive a much larger EITC than childless workers, and the effect of the credit on labor force participation is larger for those with children, the hourly wages of both groups are similarly affected by an EITC increase. As a check on this strategy, I also use federal variation in the EITC across gender-age-education groups, and find that those demographic groups that received the largest EITC increases also experienced a drop in their hourly wages, relative to other groups.

Does Raising the
Minimum Wage Help the Poor?, Economic Record, 2007
What is the impact of raising the minimum
wage on family incomes? Analysing the characteristics of low wage
workers, I find that those who earn near-minimum wages are
disproportionately female, unmarried and young, without post-school
qualifications and overseas born. About one-third of near-minimum wage
workers are the sole worker in their household. Due to low labour force
participation rates in the poorest households, minimum wage workers are
most likely to be in middle-income households. Using various plausible
parameters for the effect of minimum wages on hourly wages and
employment, I estimate the impact of a minimum wage rise on inequality.

With many countries considering the
adoption of a system of earned income tax credits, it is useful to
analyze how different types of credits affect labor supply and earnings.
This paper focuses on a 1999 reform to the UK tax credit system, which
increased the value of the credit and reduced the phase-out rate. Using
panel data, with individual fixed effects, I compare eligibles and
ineligibles within five groups: all individuals; those whose demographic
characteristics predict that they will have low earnings; single women;
women in couples; and men in couples. Over a 15-month period, boosting
the credit appears to have raised the labor participation rates, hours,
and earnings of those who were eligible to receive it.

To estimate the impact of raising the
minimum wage on employment, this paper uses a natural experiment,
arising from six increases in the Western Australian statutory minimum
wage during the period 1994-2001. Relative to the rest of Australia, the
employment to population ratio in Western Australia fell by a
statistically significant margin following four of the six increases.
Aggregating the increases, the elasticity of labour demand with respect
to the Western Australian statutory minimum wage is found to be -0.29. [Abstract amended to reflect March 2004 erratum]

Erratum, Australian Economic Review, March 2004 (this presents new
versions of Tables 2-4, but the conclusions are qualitatively unchanged).

The results of my study on the effect of
minimum wages on employment (Leigh 2003, 2004) have been brought into
question by Watson (2004), which raises some potential methodological
concerns. Careful reanalysis of the Western Australian minimum wage
experiment demonstrates that this critique is not well-founded. Further
checks show that the results are robust to a number of alternative
specifications, in addition to those presented in the original paper.

Taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems – Australia, Canada, New Zealand, the UK, and the US – we see that the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than with the share of the next 4 percent. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.

This paper estimates the intergenerational income elasticity for urban China, paying careful attention to the potential biases induced by income fluctuations and life cycle effects. Our preferred estimate
indicates that the intergenerational income elasticity for father–son is 0.63. This suggests that while
China has experienced rapid growth of absolute incomes, the relative position of children in the
distribution is largely related to their parents' incomes. By investigating possible causal channels, we
find that parental education plays one of the most important roles in transmitting economic status from
parents to children.

Pooling data for 1905 to 2000, we find no systematic relationship between top income shares and economic growth in a panel of 12 developed nations observed for between 22 and 85 years. After 1960, however, a one percentage point rise in the top decile’s income share is associated with a statistically significant 0.12 point rise in GDP growth during the following year. This relationship is not driven by changes in either educational attainment or top tax rates. If the increase in inequality is permanent, the increase in growth appears to be permanent, but it takes 13 years for the cumulative positive effect of faster growth on the mean income of the bottom nine deciles to offset the negative effect of reducing their share of total income.

We estimate differences in mortality and life expectancy by levels of income, education and area-based socio-economic status using the Household, Income and Labour Dynamics in Australia survey. The study involved 16,905 respondents aged over twenty years interviewed between 2001 and 2007. Mortality estimates were based on proportional hazard regression models. The relative risk of mortality between the poorest and richest income quintile was 1.88 (1.45, 2.44) times higher and this translated into a life expectancy gap (at age twenty) of six years. Having more than twelve years of education was also associated with a significantly lower risk of death. Area-based measures of socio-economic disadvantage were not significant after controlling for individual-level factors.

Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920-2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. We observe a sharp rise in top income shares during the late-1990s, coinciding with the 1997-98 economic crisis. Where comparable data are available, top income shares in Indonesia are generally higher than in other countries, a finding that is at odds with the view that Indonesia is a relatively egalitarian society. This suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective.

The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. We revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, we are able to investigate the relationship for 11 developed countries over the period 1921–2002. We find no consistent relationship between lagged top income shares and current savings rates, and our standard errors are small enough that we are able to reject more than modest effects in either direction. We view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.

How Closely Do Top Income Shares Track Other Measures of Inequality?, Economic Journal, 2007
In recent years, researchers have used taxation statistics to estimate the share of total income held by the richest groups, such as the top 10% or the top 1%. Compiling a standardised top income shares dataset for thirteen developed countries, I find that there is a strong and significant relationship between top income shares and broader inequality measures, such as the gini coefficient. This suggests that panel data on top income shares may be a useful substitute for other measures of inequality over periods when alternative income distribution measures are of low quality, or unavailable.

Intergenerational Mobility in Australia, Berkeley Electronic Press: Contributions in Economic Analysis and Policy, 2007
Combining four surveys conducted over a forty year period, I calculate intergenerational earnings elasticities for Australia, using predicted earnings in parents’ occupations as a proxy for actual parental earnings. In the most recent survey, the elasticity of sons’ wages with respect to fathers’ wages is around 0.2. Comparing this estimate with earlier surveys, I find little evidence that intergenerational mobility in Australia has significantly risen or fallen over time. Applying the same methodology to United States data, I find that Australian society exhibits more intergenerational mobility than the United States. My method appears to slightly overstate the degree of intergenerational mobility; if the true intergenerational earnings elasticity in the United States is 0.4–0.6 (as recent studies have suggested), then the intergenerational earnings elasticity in Australia is probably around 0.2–0.3.

More Inequality, Less Social Mobility (with Dan Andrews), Applied Economics Letters, 2008
We investigate the relationship between inequality and intergenerational mobility. Proxying fathers’ earnings with using detailed occupational data, we find that sons who grew up in countries that were more unequal in the 1970s were less likely to have experienced social mobility by the late-1990s.

Inequality and
Mortality: Long-Run Evidence from a Panel of Countries (with Christopher
Jencks), Journal of Health Economics, 2007
We investigate whether changes in economic inequality affect mortality in
rich countries. To answer this question we use a new source of data on
income inequality: tax data on the share of pretax income going to the
richest 10 percent of the population in Australia, Canada, France,
Germany, Ireland, the Netherlands, New Zealand, Spain, Sweden,
Switzerland, the UK, and the US between 1903 and 2003. Although this
measure is not a good proxy for inequality within the bottom half of the
income distribution, it is a good proxy for changes in the top half of the
distribution and for the Gini coefficient. In the absence of country and
year fixed effects, the income share of the top decile is negatively
related to life expectancy and positively related to infant mortality.
However, in our preferred fixed-effects specification these relationships
are weak, statistically insignificant, and likely to change their sign.
Nor do our data suggest that changes in the income share of the richest 10
percent affect homicide or suicide rates.

Do income taxes levied at a state or regional level affect the after-tax distribution of income? Or do workers merely move between regions, causing pre-tax wages to adjust? Using the full income tax parameters for all US states from 1977-2002, I create a “simulated tax redistribution index”, which captures the mechanical impact of changes in tax policy on the Gini coefficient, but is exogenous to any behavioral response. Analyzing the effect of this redistribution index on inequality, I find that gross wages do not adjust so as to undo the effect of changes in state income taxes. On aggregate, more redistributive state taxes do not substantially affect interstate migration, nor do they reduce per-capita state personal income.

Using taxation statistics, we estimate the income share held by top income groups in New Zealand over the period 1921–2005. We find that the income share of the richest fell during the 1930s, rose again after the Second World War, and steadily declined from the late-1950s until the mid-1980s. From the mid-1980s until the mid-1990s, top income shares rose rapidly, particularly at the very top of the distribution. We present evidence that top marginal tax rates and changing top income shares in Australia and the United Kingdom may have contributed to fluctuations in the income share of the richest 1 percent. Past economic growth does not seem to have a strong effect on the income share of the top percentile group.

Using taxation statistics, we estimate the
income share held by top income groups in Australia over the period
1921-2003. We find that the income share of the richest fell from the
1920s until the mid-1940s, rose briefly in the post-war decade, and then
declined until the early-1980s. During the 1980s and 1990s, top income
shares rose rapidly. At the start of the twenty-first century, the income
share of the richest was higher than it had been at any point in the
previous fifty years. Among top income groups, recent decades have also
seen a rise in the share of top income accruing to the super-rich. Trends
in top income shares are similar to those observed among other elite
groups, such as judges, politicians, top bureaucrats and CEOs. We
speculate that changes in top income shares may have been affected by top
marginal tax rates, skill-biased technological change, social norms about
inequality, and the internationalisation of the market for
English-speaking CEOs.

Prior to the last three decades, regular
surveys on household income were rare or non-existent in many developed
countries, making it difficult for economists to develop long-run series
on income distribution. Using taxation statistics, which tend to be
available over a longer time span, I propose a method for imputing the
incomes of non-taxpayers, and deriving the underlying distribution of
income. Because taxation statistics are typically disaggregated by
gender, it is possible to derive separate income distribution series for
men and women in countries where individuals file separately. I show
that over the past four decades, the distribution of adult male incomes
is a good proxy for the distribution of family incomes. Applying this
method to Australia, I develop a new annual series for inequality from
1942 to 2001. Inequality fell in the 1950s and the 1970s, and rose during
the 1980s and 1990s – a pattern similar to the United Kingdom.

Using a large Australian social survey,
combined with precise data on neighbourhood characteristics, I explore
the factors that affect trust at a local level (“localised trust”) and
at a national level (“generalised trust”). Trust is positively
associated with the respondent’s education, and negatively associated
with the amount of time spent commuting. At a neighbourhood level, trust
is higher in affluent areas, and lower in ethnically and linguistically
heterogeneous communities, with the effect being stronger for linguistic
heterogeneity than ethnic heterogeneity (suggesting that communication
may be a key mediating factor). Linguistic heterogeneity reduces
localised trust for both natives and immigrants, and reduces generalised
trust only for immigrants. Instrumental variables specifications show
similar results. By contrast with the United States, there is no
apparent relationship between trust and inequality across neighbourhoods
in Australia.

Several cross-country studies have
observed a negative correlation between inequality and interpersonal
trust. Using data from 59 countries, I instrument for inequality using
the relative size of the mature-aged cohort, and find that a rise in
inequality reduces trust.

The debate over merit pay can be summed up as follows: economists like it, voters love it, and teachers are divided. Can merit pay be made to work? I survey three sets of data that are relevant to answering this question: impact studies of teacher merit-pay schemes,
evidence on teacher attitudes to merit pay, and surveys of attitudes in the general
public to merit pay. Looking at the existing merit-pay plans, one is struck by the fact that their incentive schemes are often very complicated, and most estimates are of
short-run effects (so do not capture selection into the teaching profession). Teacher attitudes
are mixed, with new teachers more open to merit pay than their more experienced
colleagues. Teachers are particularly hostile to merit-pay schemes based on test scores,
raising a particular challenge for the political sustainability of such plans. I conclude with 10 suggestions for future research on teacher merit pay.

Can changes in teacher pay encourage more
able individuals to enter the teaching profession? So far, studies of
the impact of pay on the aptitude distribution of teachers have provided
mixed evidence on the extent to which altering teacher salaries
represents a feasible solution to the teacher quality problem. One
possible reason is that these studies have been unable to separate labor
supply effects from labor demand effects. To address this, I model the
relationship between current salaries and the academic aptitude of
future teachers (those entering teacher education courses). Using a
unique dataset of test scores for every individual admitted into an
Australian university between 1989 and 2003, I explore how changes in
average pay or pay dispersion affect the decision to enter teacher
education courses in Australia’s eight states and territories. A 1
percent rise in the salary of a starting teacher boosts the average
aptitude of students entering teacher education courses by 0.6
percentile ranks, with the effect being strongest for those at the
median. This result is robust to instrumenting for teacher pay using
uniform salary schedules for public schools. I also find some evidence
that pay dispersion in the non-teaching sector affects the aptitude of
potential teachers.

Long-Run Trends in School Productivity: Evidence From Australia (with Chris Ryan), Education Finance and Policy, 2011
Outside the United States, very little is known about long-run trends in school productivity. We present new evidence using two data series from Australia, where comparable tests are available back to the 1960s. For young teenagers (aged 13-14), we find a small but statistically significant fall in numeracy over the period 1964-2003, and in both literacy and numeracy over the period 1975-1998. The decline is in the order of one-tenth to one-fifth of a standard deviation. Adjusting this decline for changes in student demographics does not affect this conclusion; if anything, the decline appears to be more acute. The available evidence also suggests that any changes in student attitudes, school violence, and television viewing are unlikely to have had a major impact on test scores. Real per-child school expenditure increased substantially over this period, implying a fall in school productivity. Although we cannot account for all the phenomena that might have affected school productivity, we identify a number of plausible explanations.

Estimating Teacher Effectiveness From Two-Year Changes in Students’ Test Scores, Economics of Education Review, 2010
Using a dataset covering over 10,000 Australian primary school teachers and over 90,000 pupils, I estimate how effective teachers are in raising students’ test scores from one exam to the next. Since the exams are conducted only every two years, it is necessary to take account of the teacher’s work in the intervening year. Even after adjusting for measurement error, the resulting teacher fixed effects are widely dispersed across teachers, and there is a strong positive correlation between a teacher’s gains in literacy and numeracy. Teacher fixed effects show a significant association with some, though not all, observable teacher characteristics. Experience has the strongest effect, with a large effect in the early years of a teacher’s career. Female teachers do better at teaching literacy. Teachers with a master’s degree or some other form of further qualification do not appear to achieve significantly larger test score gains. Overall, teacher characteristics found in the departmental payroll database can explain only a small fraction of the variance in teacher performance.

The tax-transfer system can affect both costs and benefits of higher education. For example, more generous student income support should increase educational participation rates, while more progressive taxes should reduce educational participation rates. With some exceptions, the literature on taxes and educational participation generally concludes that taxation can have a substantial impact on human capital acquisition. However, one of the features about the empirical studies on taxation and human capital is that it consists almost exclusively of simulation studies, which model behaviour according to a set of parameters that are drawn from previous studies. A limitation of these studies is that they generally assume no uncertainty and full information, which may not hold in practice. The literature on subsidies and human capital tends to consist largely of natural experiment studies, which have the advantage that they are estimated from real-world policy changes. These studies tend to suggest that subsidies can affect participation, but that the effects are larger for low-income students, and that the impact of grants is larger than the impact of loans. Since educational subsidies are generally marketed directly to young people, it is not unreasonable to think changes in subsidies may be more salient than the degree of progressivity in the taxation system. In trying to set optimal education taxes and subsidies, it is useful to have regard to the literature on social returns to education. This suggests that social returns are present, particularly in the areas of crime (from higher school completion rates) and productivity (from higher university completion rates). However, the best estimates of the size of social returns suggest that in the main, they should not be a key driver of policy. By contrast, there is robust evidence that private returns to education are large and significant. Completing year 12 raises gross income by 30 percent (relative to completing year 10) and completing a bachelor’s degree raises gross earnings by 49 percent (relative to completing year 12). Taking taxes and transfers into account lowers these estimates by 11-15 percent, but the private gain from human capital acquisition is still substantial. Finally, I look across 27 developed nations, to see whether those with higher public subsidies to education, or less progressive taxes, have higher rates of participation in tertiary education. Contrary to theoretical predictions, I find no significant evidence that more generous subsidies or lower tax rates on the rich have the effect of raising educational participation. One possible interpretation of this result is that the cross-country measure of participation is poorly measured, or confounded by an omitted variable that affects both participation and subsidies/taxes. Another plausible explanation is that, in aggregate, taxes and subsidies have a relatively small impact on educational participation.

Family background is known to have a substantial impact on students’ literacy and numeracy results. This raises questions about whether any of the remaining differences in results are due to school performance, or whether they are merely due to random noise. This article reviews research from the OECD’s Programme for International Student Assessment (PISA) study, based on student-level analysis. It then presents new evidence based on publicly reported school-level data from Western Australia. Combining test results with data on schools’ socioeconomic characteristics, this study estimates the degree to which some schools outperform those with similar characteristics. On a ‘like schools’ basis, school differences are shown to be persistent across subjects, grades and years.

Improving cognitive skills of young children has been suggested as a possible strategy for equalising opportunities across racial groups. Using data on 4-5 year olds in the Longitudinal Survey of Australian Children, we focus on two cognitive tests: the Peabody Picture Vocabulary Test (PPVT) and the ‘Who Am I?’ test (WAI). We estimate the test score gap between Indigenous and non-Indigenous children to be about 0.3 to 0.4 standard deviations, suggesting that the typical Indigenous 5 year-old has a similar test score to the typical non-Indigenous 4 year-old. Between one-third and two-thirds of the Indigenous/non-Indigenous test score gap appears to be due to socio-economic differences, such as income and parental education. We review the literature on test score differences in Australia, and find that our estimated gaps are lower than most of those found in the literature. This implies that the test score gap between Indigenous and non-Indigenous children may widen over the lifecycle, a finding that has implications for policies aimed at improving educational opportunities for Indigenous children. Stata do-files (zipped)

International research suggests that
differences in teacher performance can explain a large portion of
student achievement. Yet little is known about how the quality of the
Australian teaching profession has changed over time. Using consistent
data on the academic aptitude of new teachers, we compare those who have
entered the teaching profession in Australia over the past two decades.
We find that the aptitude of new teachers has fallen considerably.
Between 1983 and 2003, the average percentile rank of those entering
teacher education fell from 74 to 61, while the average rank of new
teachers fell from 70 to 62. One factor that seems to have changed
substantially over this period is average teacher pay. Compared to
non-teachers with a degree, average teacher pay fell substantially over
the period 1983-2003. Another factor is pay dispersion in alternative
occupations. During the 1980s and 1990s, non-teacher earnings at the top
of the distribution rose faster than earnings at the middle and bottom
of the distribution. For an individual with the potential to earn a wage
at the 90th percentile of the distribution, a non-teaching occupation
looked much more attractive in the 2000s than it did in the 1980s. We
believe that both the fall in average teacher pay, and the rise in pay
differentials in non-teaching occupations are responsible for the
decline in the academic aptitude of new teachers over the past two
decades.

This paper investigates the relationship
between housing prices and the quality of public schools in the Australian
Capital Territory. To disentangle the effects of schools and other
neighbourhood characteristics on the value of residential properties, we
compare sale prices of homes on either side of high school attendance
boundaries. We find that a 5 percent increase in test scores (approximately
one standard deviation) is associated with a 3.5 percent increase in house
prices. Our result is in line with private school tuition costs, and accords
with prior research from Britain and the United States. Estimating the
effect of school quality on house prices provides a possible measure of the
extent to which parents value better educational outcomes.

Do Very
High Tax Rates Induce Bunching? Implications for the Design of
Income-Contingent Loan Schemes (with Bruce
Chapman), Economic Record, 2009
We test whether very high marginal tax rates affect taxpayer behaviour,
using a unique policy. Under the Higher Education Contribution Scheme –
an income-related university loans scheme in Australia – former students
with a debt face a sharp discontinuity. At the first repayment threshold
they are required to repay a percentage of their entire income,
resulting in an effective marginal tax rate that could be regarded as
being as high as 76,000 percent. We formally model the taxpayer
decision, and then use a sample of taxpayer returns provided to us by
the tax office to investigate whether taxpayers bunch below the
repayment threshold. We find a statistically significant degree of
bunching below the threshold, but the effect is economically small. On
net, we estimate that both the deadweight cost and the budgetary loss
are less than A$1 million per year, a small fraction of the amount
annually repaid through the Higher Education Contribution Scheme. The
result has an important implication for the design of income contingent
loans for higher education, such as those being introduced in the UK for
tuition in September 2006. This is that it is possible to design
arrangements in which the first income threshold of repayment is
apparently high, but which are still able to deliver relatively high
revenue streams in the early stages of income contingent policy reform
without important tax payment avoidance consequences. Our findings also
reinforce earlier research suggesting only minimal bunching around kink
points in taxation schedules.

Returns to Education in Australia, Economic Papers, 2008
Using data from the 2001-2005 waves of the Household, Income and Labour Dynamics in Australia survey, and taking account of existing estimates of ability bias and social returns to schooling, I estimate the economic return to various levels of education. Raising high school attainment appears to yield the highest annual benefits, with per-year gains as high as 30 percent (depending on the adjustment for ability bias). Some forms of vocational training also appear to boost earnings, with significant gains from Certificate Level III/IV qualifications (for high school dropouts only), and from Diploma and Advanced Diploma qualifications. At the university level, Bachelor degrees and postgraduate qualifications are associated with significantly higher earnings, with each year of a Bachelor degree raising annual earnings by about 15 percent. For high school, slightly less than half the gains are due to increased productivity, with the rest due to higher levels of participation. For vocational training, about one-third of the gains are from productivity, and two-thirds from greater participation. For university, most of the gains are from productivity. I find some evidence that the productivity benefits of education are higher towards the top of the distribution, but the participation effects are higher towards the bottom of the conditional earnings distribution.

We compare three quasi-experimental
approaches to estimating the returns to schooling in Australia:
instrumenting schooling using month of birth, instrumenting schooling
using changes in compulsory schooling laws, and comparing outcomes for
twins. With annual pre-tax income as our measure of income, we find that
the naïve (OLS) returns to an additional year of schooling is 13%. The
month of birth IV approach gives an 8% rate of return to schooling,
while using changes in compulsory schooling laws as an IV produces a 12%
rate of return. Finally, we review estimates from twins studies. While
these studies have tended to estimate a lower return to education, we
believe that this is primarily due to the better measurement of income
and schooling in our dataset. Australian twins studies are consistent
with our findings insofar as they find little evidence of ability bias
in the OLS rate of return to schooling. Our estimates of the ability
bias in OLS estimates of the rate of return to schooling range from 9%
to 39%. Overall, our findings suggest the Australian rate of return to
education, corrected for ability bias, is around 10%, which is similar
to the rate in Britain, Canada, the Netherlands, Norway and the United
States.

There are two main hypotheses for the
decline in the aptitude of public school teachers since 1960: improved
job opportunities for females in other occupations and the compression
of teaching wages owing to unionization. Using data on several college
graduating cohorts from 1961 to 1997, we investigate both hypotheses. To
separate the hypotheses, we exploit the fact that states varied
considerably in the progress of unionization and female wage parity. We
proxy for a teacher's aptitude with the mean college aptitude of
students at her undergraduate college. We identify the effects of
unionization using laws that legalized and facilitated teachers'
unionization. The evidence suggests that compression of teaching wages
is responsible for about three-quarters of the decline in teacher
aptitude. Females' opportunities in alternative occupations do matter,
but opportunities improved rather similarly for females of all
aptitudes. Although alternative occupations drew women out of teaching
in general, they did not have a sufficiently disproportionate effect on
high aptitude women to explain the bulk of the decline in teachers
aptitude.

Does faster economic growth increase pressure for democratic change, or reduce it? Using
data for 154 countries for the period 1963-2007, we examine the short-run relationship
between economic growth and moves toward and away from greater democracy. To address
the potential endogeneity of economic growth, we use variation in precipitation,
temperatures, and commodity prices as instruments for a country’s rate of economic growth.
Our results indicate that more rapid economic growth reduces the short-run likelihood of
institutional change toward democracy. Output contractions due to adverse weather shocks
appear to have a particularly important impact on the timing of democratic change.

Land transfer taxes are a substantial portion of the cost of moving house in many developed countries. However, little is known about the effect of such taxes on the housing market. Since stamp duties are endogenous with respect to the house price, I create an instrumental variable that is the stamp duty on a property, given that postcode’s starting house price and the national house price trend. In a specification with postcode and year fixed effects, this instrument effectively captures policy changes and nonlinearities in the stamp duty schedule. I find that the impact of an increase in the tax rate is to lower house prices, with the magnitude of the effect rising slightly over the medium run. I also observe impacts of stamp duty on housing turnover. A 10 percent increase in stamp duty lowers turnover by 1-2 percent in the first year, and by 4-5 percent if sustained over a 3 year period.

We employ several different approaches to estimate the political position of Australian media outlets, relative to federal parliamentarians. First, we use parliamentary mentions to code over 100 public intellectuals on a left-right scale. We then estimate slant by using the number of mentions that each public intellectual receives in each media outlet. Second, we have independent raters separately code front-page election stories and headlines. Third, we tabulate the number of electoral endorsements that newspapers give to each side of politics in federal elections. Overall, we find that the Australian media are quite centrist, with very few outlets being statistically distinguishable from the middle of Australian politics. It is possible that this is due to the lack of competition in the Australian media market. To the extent that we can separate content slant from editorial slant, we find some evidence that editors are more partisan than journalists. Non-technical summary

Using survey evidence, I estimate the impact of $21 billion in household payments delivered in Australia between December 2008 and May 2009. Forty percent of households who said that they received a payment reported having spent it. This is a higher spending rate than has been recorded in surveys assessing the 2001 and 2008 tax rebates in the United States. One possible explanation for this is that individuals are more likely to spend "bonuses" (as the Australian payments were described) than "rebates" (as the US payments were described). Using an approach for converting spending rates into an aggregate marginal propensity to consume (MPC), the Australian results are consistent with an aggregate MPC of 0.41-0.42. Since this estimate is based largely on first-quarter spending, it may understate the longer-run impact of the package on consumer expenditure.

Studies of the effect of government spending on unemployment are potentially confounded by reverse causality. To address the endogeneity problem, we exploit variation in a pork-barrel road-building program, and find that higher government expenditure on road-building substantially reduces local unemployment.

Using data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent’s re-election probability by 3-5 percent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the United States economy – has a non-trivial impact on the re-election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.

Is Voting Skin-Deep? Estimating the Effect of Candidate Ballot Photographs on Election Outcomes (with Tirta Susilo), Journal of Economic Psychology, 2009
In the Northern Territory, Australia, ballot papers for territory elections depict candidates’ photographs. We exploit this unusual electoral feature by looking at the effect that candidates’ beauty and skin color has on voting patterns. Our results for beauty are mixed, but we find strong evidence that skin color matters. In electorates with a small Indigenous population, lighter-skinned candidates receive more votes, while in electorates with a high number of Indigenous people, darker-skinned candidates are rewarded at the ballot box. The relationship between skin color and electoral performance is stronger for challengers than incumbents. We explain this with a model in which voters use skin color as a proxy for some underlying characteristic which they value only to the extent that they share the trait.

Using data from all elections to the Australian House of Representatives between
1903 and 2004, we examine the relationship between candidates’ gender and their
share of the vote. We find that the vote share of female candidates is 0.6 percentage
points smaller than that of male candidates (for major parties, the gap widens to 1½
percentage points), but find little evidence that the party preselection system is
responsible for the voting bias against women. Over time, the gap between male and
female candidates has shrunk considerably as a result of changes in social norms (as
proxied by the gender pay gap and attitudinal data) and the share of female candidates
running nationwide. We find little evidence that party-based affirmative action
policies have reduced the gender penalty against female candidates.

Beautiful
Politicians (with Amy King), Kyklos, 2009
Are beautiful politicians more likely to be elected? To test this, we
use evidence from Australia, a country in which voting is compulsory,
and in which voters are given ‘How to Vote’ cards depicting photos of
the major party candidates as they arrive to vote. Using raters chosen
to be representative of the electorate, we assess the beauty of
political candidates from major political parties, and then estimate the
effect of beauty on voteshare for candidates in the 2004 federal
election. Beautiful candidates are indeed more likely to be elected,
with a one standard deviation increase in beauty associated with a 1½ –
2 percentage point increase in voteshare. Our results are robust to
several specification checks: adding party fixed effects, dropping
well-known politicians, using a non-Australian beauty rater, omitting
candidates of non-Anglo Saxon appearance, controlling for age, and
analyzing the ‘beauty gap’ between candidates running in the same
electorate. The marginal effect of beauty is larger for male candidates
than for female candidates, and appears to be approximately linear.
Consistent with the theory that returns to beauty reflect
discrimination, we find suggestive evidence that beauty matters more in
electorates with a higher share of apathetic voters.

Are Ballot Order Effects Heterogeneous? (with Amy King), Social Science Quarterly, 2009
Past studies of ballot order effects have typically focused on the average benefit to a candidate from being placed at the top of the ballot. But it is possible that this simple average may mask systematic differences in how the ballot order effect varies across candidates and voters. To test this, we analyse all Australian federal elections from 1984-2004, a dataset that is an order of magnitude larger than those used in previous ballot order studies. We find that being placed first on the ballot increases a candidate’s vote share by about 1 percentage point. As a proportion of their total vote, the ballot order effect is much larger for independents and minor parties than for major parties. The ballot order effect appears to be similar for male and female candidates, and does not show strong trends upwards or downwards over the 20 year period covered by our study. Across electorates, the ballot order effect is higher in places where voters are younger and fluency in English is lower.

Which electorates receive targeted funding, and does targeted funding swing votes? To answer these questions, I analyze four discretionary programs funded by the Australian federal government during the 2001-2004 election cycle. Controlling for relevant demographic characteristics of the electorate, those electorates held by the governing coalition received a larger share of discretionary funding, and a larger number of program grants. Among government seats, funding does not appear to have been directed towards those that were more marginal. More discretionary funding – particularly on road-building – was associated with a larger swing towards the government in the 2004 election.

I
explore the voting patterns of trade union members in Australian elections
conducted between 1966 and 2004, and find that on average, 63 percent of
trade union members vote for the Australian Labor Party. Despite the fact
that union membership declined from around one-half of the workforce in the
early-1980s to one-quarter of the workforce in the early-2000s, unionists
have not become more pro-Labor. Analysing unionists’ voting behaviour by
gender, I find that male unionists were more pro-Labor than female unionists
in the 1960s, but the reverse is true today. Recognising that union
membership may be endogenous with respect to political ideology, I
instrument for union membership and conclude that the observed association
between union membership and voting reflects a causal relationship.

We
review the efficacy of three approaches to forecasting elections:
econometric models that project outcomes on the basis of the state of the
economy; public opinion polls; and election betting (prediction markets). We
assess the efficacy of each in light of the 2004 Australian election. This
election is particularly interesting both because of innovations in each
forecasting technology, and also because the increased majority achieved by
the Coalition surprised most pundits. While the evidence for economic voting
has historically been weak for Australia, the 2004 election suggests an
increasingly important role for these models. The performance of polls was
quite uneven, and predictions both across pollsters, and through time, vary
too much to be particularly useful. Betting markets provide an interesting
contrast, and a slew of data from various betting agencies suggests a more
reasonable degree of volatility, and useful forecasting performance both
throughout the election cycle and across individual electorates.

Estimating the Impact of Gubernatorial Partisanship on Policy Settings and Economic Outcomes: A Regression Discontinuity Approach, European Journal of Political Economy, 2008
Using panel data from US states over the period 1941-2002, I measure the impact of gubernatorial partisanship on a wide range of different policy settings and economic outcomes. Across 32 measures, there are surprisingly few differences in policy settings, social outcomes and economic outcomes under Democrat and Republican Governors. In terms of policies, Democratic Governors tend to prefer slightly higher minimum wages. Under Republican Governors, incarceration rates are higher, while welfare caseloads are higher under Democratic Governors. In terms of social and economic outcomes, Democratic Governors tend to preside over higher median post-tax income, lower post-tax inequality, and lower unemployment rates. However, for 26 of the 32 dependent variables, gubernatorial partisanship does not have a statistically significant impact on policy outcomes and social welfare. I find no evidence of gubernatorial partisan differences in tax rates, welfare generosity, the number of government employees or their salaries, state revenue, incarceration rates, execution rates, pre-tax incomes and inequality, crime rates, suicide rates, and test scores. These results are robust to the use of regression discontinuity estimation, to take account of the possibility of reverse causality. Overall, it seems that Governors behave in a fairly non-ideological manner.

Do voters reward national leaders who are more
competent economic managers, or merely those who happen to be in power when
the world economy booms? According to rational voting models, electors
should parse out the state of the world economy when deciding whether to
re-elect their national leader. I test this theory using data from 268
democratic elections held between 1978 and 1999, comparing the effect of
world growth (“luck”) and national growth relative to world growth
(“competence”). In the preferred specification, which allows for countries
to have different degrees of global integration, an extra percentage point
of world growth boosts incumbents’ chances of re-election by 9 percent,
while an extra percentage point of national growth relative to world growth
only boosts an incumbent’s chances of re-election by 4 percent. Voters are
more likely to reward competence in countries that are richer and better
educated. Controlling for income, higher rates of newspaper readership
reduce the returns to luck, while higher rates of television viewing reduce
the returns to competence.

Blanchflower
and Oswald (2005) observe an apparent puzzle: they claim that Australia
ranks highly in the Human Development Index (HDI), but relatively poorly in
happiness. However, when we compare their happiness data with the HDI,
Australia appears happier, not sadder, than its HDI score would predict.
This conclusion also holds when we turn to a larger cross-national dataset
than the one used by Blanchflower and Oswald, when we analyse life
satisfaction in place of happiness, and when we measure development using
GDP per capita in place of the HDI. Indeed, in the World Values Survey, only
one other country (Iceland) has a significantly higher level of both life
satisfaction and happiness than Australia. Our findings are also consistent
with numerous cross-national surveys conducted since the 1940s, which have
consistently found that Australians report high levels of wellbeing.

What impact do income and other demographic factors have on a voter’s partisan choice? Using post-election surveys of 14,000 voters in 10 Australian elections between 1966 and 2001, I explore the impact that individual, local, and national factors have on voters’ decisions. In these 10 elections, the poor, foreign-born, younger voters, voters born since 1950, men, and those who are unmarried are more likely to be left-wing. Over the past 35 years, the partisan gap between men and women has closed, but the partisan gap has widened on three dimensions: between young and old; between rich and poor; and between native-born and foreign-born. At a neighborhood level, I find that, controlling for a respondent’s own characteristics, and instrumenting for neighborhood characteristics, voters who live in richer neighborhoods are more likely to be right-wing, while those in more ethnically diverse or unequal neighborhoods are more likely to be left-wing. Controlling for incumbency, macroeconomic factors do not seem to affect partisan preferences – Australian voters apparently regard both major parties as equally capable of governing in booms and busts.

We
analyze financial market data in order to produce an ex-ante assessment of
the cost of war with Iraq. The novel feature of our analysis derives from
the existence of a market for "Saddam Securities," a new option
traded on an online betting exchange that pays only if Saddam Hussein is
ousted. We find that war raises oil prices by around $10 per barrel, and
lowers the value of US equities by about 15 percent.

What is the best way to predict Australian federal election results? This article analyses three forecasting tools: opinion polls, economic models, and betting odds. Historically, we  nd that opinion polls taken close to the election are quite accurate, while economic models provide better medium-run forecasts. The November 2001 federal election largely follows this pattern, although the economic models provided more accurate projections than recorded through the 1990s. Against these, we compare betting odds, analysing a rich data source from one of Australia’s largest bookmakers, Centrebet. The betting market not only correctly forecast the election outcome, but also provided very precise estimates of outcomes in a host of individual electorates. Betting  uctuations present an intriguing quantitative record of the shifting fortunes of the campaign. Particularly in marginal seats, the press may have better served its readers by reporting betting odds than by conducting polls. We conclude that the results of these three models can help determine how important the events of August and September 2001 were in deciding the outcome of the election.

Born on the First of July: An (Un)natural
Experiment in Birth Timing (with Joshua
Gans), Journal of Public Economics, 2009
It is well understood that government policies can distort behavior. But
what is less often recognized is the anticipated introduction of a
policy can introduce its own distortions. We study one such
“introduction effect”, using evidence from a unique policy change in
Australia. In 2004, the Australian government announced that children
born on or after July 1, 2004 would receive a $3000 “Baby Bonus.”
Although the policy was only announced a few months before its
introduction, parents appear to have behaved strategically in order to
receive this benefit, with the number of births dipping sharply in the
days before the policy commenced. On July 1, 2004, more Australian
children were born than on any other single date in the past thirty
years. We estimate that over 1000 births were “moved” so as to ensure
that their parents were eligible for the Baby Bonus, with about one
quarter being moved by more than two weeks. Most of the effect was due
to changes in the timing of inducement and cesarean section procedures.
This birth timing event represents a considerable opportunity for health
researchers to study the impact of planned birthdays and hospital
management issues.

In 1997, Australia implemented a gun buyback program that reduced the stock of firearms by around one-fifth (and nearly halved the number of gun-owning households). Using differences across states, we test whether the reduction in firearms availability affected homicide and suicide rates. We find that the buyback led to a drop in the firearm suicide rates of almost 80 per cent, with no significant effect on non-firearm death rates. The effect on firearm homicides is of similar magnitude, but is less precise. The results are robust to a variety of specification checks, and to instrumenting the state-level buyback rate.

Do Gun Buybacks Save Lives? Evidence from Time Series Variation (with Christine Neill), Current Issues in Criminal Justice, 2008
Three recent papers have examined the effect of a national tightening of firearm legislation and gun buy-back in Australia in 1996-1997 on firearm and non-firearm death rates. Despite analysing almost the same data, the three papers reach rather different conclusions. In this article, we highlight key methodological concerns with the papers. We also make some judgments as to the evidence on the effectiveness of the Australian legislation. Drawing strong conclusions from simple time series analysis is not warranted, but to the extent that this evidence points anywhere, it is towards the firearms buy-back reducing gun deaths.

Immigrants
Assimilate as Communities, Not Just as Individuals (with Tim Hatton), Journal of Population Economics, 2011
There is a large econometric literature that examines the economic
assimilation of immigrants in the United States and elsewhere. On the
whole immigrants are seen as atomistic individuals assimilating in a
largely anonymous labour market, a view that runs counter to the spirit
of the equally large literature on ethnic groups. Here we argue that
immigrants assimilate as communities, not just as individuals. The
longer the immigrant community has been established the better adjusted
it is to the host society and the more the host society comes to accept
that ethnic group. Thus economic outcomes for immigrants should depend
not just on their own characteristics, but also on the legacy of past
immigration from the same country. In this paper we test this hypothesis
using data from a 5 percent sample of the 1980, 1990 and 2000 US
censuses. We find that history matters in immigrant assimilation: the
stronger is the tradition of immigration from a given source country,
the better the economic outcomes for new immigrants from that source.

Minding the Shop: The
Case of Obstetrics Conferences (with Joshua Gans and Elena Varganova), Social Science and Medicine, 2007
We estimate the impact of annual obstetricians and gynecologists’
conferences on births in Australia and the United States. In both
countries, the number of births drops by 1 to 4 percent during the days
on which these conferences are held. We argue that for this reason
professional obstetrics societies should reconsider the timing of their
annual conferences to accommodate the lowest natural birth rate in the
year.

Did the
Death of Australian Inheritance Taxes Affect Deaths? (with Joshua Gans), Berkeley Electronic Press: Topics in Economic Analysis & Policy, 2006
In 1979, Australia abolished federal inheritance taxes. Using daily
deaths data, we show that approximately 50 deaths were shifted from the
week before the abolition to the week after (amounting to over half of
those who would have been eligible to pay the tax). Our results imply
that over the very short run, the death rate is highly elastic with
respect to the inheritance tax rate.

Bargaining Over Labor: Do Patients have any Power? (with Joshua
Gans), Economic Record, 2012
Using data on births from Australia, we estimate the level of patient
bargaining power in negotiations over birth timing. In doing so, we exploit
the fact that parents do not like to have children born on the
“inauspicious” dates of February 29 and April 1. We show that, in general,
the birth rate is lower on these dates, and argue that this reflects parent
preferences. When these inauspicious dates abut a weekend, this creates a
potential conflict between avoiding the inauspicious date, and avoiding the
weekend. We find that in approximately three-quarters of cases, this
conflict is resolved in favor of the physician. This suggests that while
doctors have more power than patients, patients are sometimes able to
influence medical decisions for non-medical reasons.

How much do non-medical factors affect the
timing of conceptions, births and deaths? To test this, we estimate the
effect of the millennium on conceptions, births and deaths. With a highly
flexible empirical specification, we find large and significant increases in
conceptions and births, and suggestive evidence of an effect on deaths.

Does the Lunar
Cycle Affect Birth and Deaths? (with Joshua
Gans), 2006
There is a commonplace notion that full moons affect natality and
mortality. To test this theory, we obtain daily births and deaths data
from Australia, covering all 10,592 days from 1 January 1975 to 31
December 2003. We find that full moons are not associated with any
significant change in the number of conceptions, births, or deaths.
Moreover, our standard errors are sufficiently tight to make it possible
to rule out even modest positive or negative effects.

Pooling microdata from five Australian
censuses, I explore the relationship between child gender and divorce.
By contrast with the United States, I find no evidence that the gender
of the first child has a significant impact on the decision to marry or
divorce. However, among two-child families, parents with two children of
the same sex are 1.7 percentage points less likely to be married than
parents with a boy and a girl. Surveys of parental attitudes suggest
that this effect is more likely to be driven by fathers than by mothers.
This finding is not consistent with theories of preference for sons over
daughters, differential costs, role models or complementary costs, but
is consistent with a theory of parity preference.

This
paper inserts Veblen’s (1898) concepts of conspicuous leisure and
conspicuous consumption into a very simple model. Individuals have the
choice to either invest their time into working, leading to easily
observable levels of consumption, or into conspicuous leisure, whose effect
on utility depends on how observable leisure is. We let the visibility of
leisure depend positively on the amount of time an individual and her
neighbors have lived in the same area. Individuals optimize across
conspicuous leisure and conspicuous consumption. If population turnover is
high, individuals are made worse off, since the visibility of conspicuous
leisure then decreases and the status race must be played out primarily via
conspicuous consumption. Analyzing interstate mobility in the US, we find
strong support for our hypothesis: a 1 percentage point rise in population
turnover increases the average work week of non-migrants by 7 minutes. The
negative externality of population turnover on the visibility of conspicuous
leisure is an argument for higher mobility taxes.

Diversity, Trust and Redistribution, Dialogue (Journal of the
Academy of Social Sciences in Australia), 2006It is a
safe bet that Australia will become more ethnically diverse in the
future. How will this affect trust and attitudes towards redistribution?

Political Economy of Tax Reform in Australia, Public Policy,
2006
The tax cuts in the 2005 and 2006 budgets will increase Australian
inequality by about half a gini point. I speculate about the factors that
might have led to such regressive tax cuts being enacted.

Growth Matters, Aurora Magazine,
July 2006
It is sometimes argued that Australia would better off maximising
self-reported happiness than aiming to boost national income. Yet
because individuals become habituated to improvements in living
standards, happiness is a more useful tool for comparing people in the
same society than it is for measuring changes in societal wellbeing over
time.

Those who advocate
lowering top tax rates are out of step with the views of most Australians.
Contrary to figures that are often reported, the income of the average
Australian is less than $30,000 per year, which is near the bottom of the 30
percent tax bracket. Instead, we should simplify our tax filing system by
allowing most people the option of not filing a return, and reduce
effective marginal tax rates at the bottom, where the rates are highest,
and the problem of joblessness most acute.

In the field of primary and secondary
education, progressives in Australia have generally adopted a
conservative approach to reform. Yet with troubling new evidence
suggesting that literacy and numeracy scores have stagnated or fallen
since the 1970s, Australian progressives should be more open to new
reforms being favoured by social democrats in Britain and the US:
publishing test score results, promoting healthy competition between
schools, and finding new ways to attract and keep the best teachers.

The quality of the US
teaching profession has declined since the 1960s, and there are enormous
disparities in teacher quality between poor and affluent schools. We
discuss some solutions to help policymakers tackle the teacher quality
crisis.

Over the past twenty years, Australia's
unionisation rate has halved. Four factors explain the collapse: changes
to the laws governing unions, more product market competition, rising
inequality, and structural change in the labour market.

Continental Drift, a review essay discussing Alberto Alesina and
Edward Glaeser, Fighting Poverty in the US and Europe: A World of
Difference. Published in the Australian Financial Review, 3 December 2004

A new book by two Harvard economists sets
out to discover why Europe's welfare systems are more generous than
America's. They conclude that two factors - voting systems and ethnic
diversity - explain most of the gap. How does Australia fit into the
argument, and what does this say about the future of welfare systems in an
increasingly diverse society?

Randomised
trials are generally considered to be the "gold standard" in
policy evaluation, yet remain rare
in Australia. This paper outlines why randomised trials are superior to
other methods of evaluation. By contrast to most alternatives, randomised
trials allow researchers to observe the appropriate counterfactual: what
would have happened in the absence of the policy intervention? Six common
objections to randomised trials are addressed, and the history of
randomized trials is briefly summarised. Such trials have contributed to
policy development in four important areas: training for unemployed
workers, education, neighborhood effects, and the treatment of drug
offenders. The paper concludes with a call to Australian
policymakers to engage in more randomised trials, and suggestions of
several areas in which trials could be usefully employed.

In
2002, the Nobel prize in economics was awarded to a behavioral economist
and an experimental economist. We discuss how this emerging body of work
has affected economics, and led to new insights about saving patterns,
gym-going, and smoking.

A
radical US social experiment is showing how your neighborhood affects your
life chances. The idea of assisting poor people to move to better
neighborhoods may point the way to tackling geographically concentrated
poverty in Australia.

Looks
at the extent of global integration in the late-19th and early 20th
century, and the isolationism of the inter-war period, and considers what
implications this might have for today's globalisers.